Table Of Content

Store #1 Rogers, Arkansas Then and Now 2003 Annual Report Financial Highlights Senior Officers Net Sales (Billions) $244.5 S. Robson Walton $217.8 03 Chairman of the Board $191.3 02 H. Lee Scott, Jr. $165.0 01 President & CEO $137.6 00 David D. Glass 99 Chairman of the Executive Committee of the Board Diluted Earnings Per Share Thomas M. Coughlin $1.81 Executive Vice President; 03 $1.49 President & CEO, Wal-Mart Stores Division $1.40 02 and SAM’S CLUBUSA $1.20 01 $.99 00 Michael T. Duke 99 Executive Vice President, Administration Thomas D. Hyde Return On Assets Executive Vice President, Legal and Corporate Affairs; 9.6% 9.5% Corporate Secretary 99 9.3% 00 03 John B. Menzer Executive Vice President; 8.7% 8.5% President & CEO, International Division 01 02 Coleman H. Peterson Executive Vice President, People Division Return On Shareholders’ Equity Thomas M. Schoewe 22.9% Executive Vice President & CFO 22.4% 00 22.0% 99 21.6% B. Kevin Turner 01 03 Executive Vice President; President & CEO, SAM’S CLUBDivision 20.1% 02 Joseph J. Fitzsimmons Senior Vice President, Finance; Treasurer Table of Contents A Letter from Lee Scott................................................2 Directors A Letter from Rob Walton...........................................4 Showing the Value........................................................6 James W. Breyer J. Paul Reason Store Count .................................................................7 John T. Chambers Elizabeth A. Sanders Thinking Small.............................................................8 Thomas M. Coughlin H. Lee Scott, Jr. Setting a Global Standard..........................................10 Stanley C. Gault Jack C. Shewmaker Giving, Helping, Doing..............................................12 David D. Glass Jose H. Villarreal Roland A. Hernandez John T. Walton SAM’S CLUB...............................................................14 Dawn G. Lepore S. Robson Walton Our Good Name........................................................15 Financials...................................................................16 The story of Wal-Mart is ultimately a local story. In big cities and small towns around the world, the shopping experience of an individual Customer is what defines our Company. On the covers of this Annual Report, you will see Associates from two of our 4,600-plus store locations around the globe. These eight individuals represent more than 1 million Associates worldwide – each one dedicated to providing the very best service and selection, at the lowest possible prices, to local Front Cover Customers. The front cover features Associates from Store #1, Rogers, Arkansas Store #1 at Rogers, Arkansas, and the back cover (from left) Sonia Barrett, Department Manager shows our first SAM’S CLUB, Club Matt Loveless, Store Manager Trey Sturdivant, Cashier #8241 at Midwest City, Oklahoma. Cathy DeSpain, Assistant Manager Back Cover The growth that occurred between Club #8241, Midwest City, Oklahoma (from left) the openings of these stores, and Vanessa Taylor, Membership Desk everything that’s happened Nick West, General Manager Carol Lester, Invoice Clerk since, was made possible by Juan Trujillo, Dock Supervisor dedicated Associates focusing on one store and one Customer at a time. Remaining true to that vision will continue to determine the success of Wal-Mart. That’s what “My Wal-Mart” means: truly understanding that the shopping experience of a local Customer at a local store defines our Company and shapes our future. A Letter To Our Shareholders, Associates and business areas. It is important and Customers, that we highlight a few of these from the performances. Let’s start with President Without a doubt, fiscal 2003 was an Wal-Mart International. This group extremely challenging year. It was a achieved sales of almost $41 billion year marked by the threat of war and and an operating profit of more than terrorism, increased financial pressure $2 billion. For perspective, if Wal-Mart from rising fuel prices and corporate International were a stand-alone layoffs, and even ethical misconduct company, it would rank number 33 on by a number of companies. However, last year’s FORTUNE500 list based on despite all this, Wal-Mart had an sales. Our international business also excellent year. has grown to be our second-largest Lee Scott division in terms of sales and earnings, In fact, thanks to our Associates, trailing only the Wal-Mart Stores Wal-Mart was able to report division. Our international growth record sales ($244.5 billion) opportunities are significant, and it and record earnings will be exciting in the years ahead to ($8.0 billion) in one of watch Wal-Mart continue to develop the most difficult business as a truly global Company. environments in recent years. More specifically, One of our major growth initiatives these numbers represent continues to be our food business. a 12.3 percent increase Last year in the U.S., we added 192 in sales compared to Supercenters, and we have publicly the previous year, and a announced our intentions to add up 21.5 percent increase in to 210 more in the current year. We earnings per share. (On a currently have Supercenters in all but like-to-like basis, the increase seven states. We also completed the in earnings per share would have last fiscal year with 49 Neighborhood been 16.8 percent after adjusting Markets in eight states. We will for an accounting change for continue to be successful in this area goodwill.) We also met one of our because our food strategy is so closely most important goals: for earnings aligned with our general merchandise to grow at a rate equal to or better strategy. In both food and general than sales. merchandise, we satisfy the Customer with a consistent focus on price, As I reflect on this performance, assortment and quality. I feel a deep sense of appreciation for the Associates who made this We also are making exciting strides in possible, and I likewise remain very two other important areas: internal positive about the future of product development and global our business. procurement. Our product-development team, working with Wal-Mart buyers, Of course, any successful is driving significant improvement year is underscored by special in key product categories such as contributions from key departments apparel, domestics and electronics. 2 This is not just the opinion within Because we are developing our leaders, because it reflects our commitment to Wal-Mart. The Wall Street Journal, USA last year we were able to fill a number of our Customers and our communities. Todayand others have also made note key positions with internal people. This Our Associates earned this award, and of our progress. As this improvement included the appointments of Linda we hope that you as Shareholders are continues, we will further encourage Dillman as senior vice president and proud to be associated with Wal-Mart. our existing Customers to broaden chief information officer (CIO); Susan their shopping with us. In other Chambers as senior vice president, Finally, as we look to the year ahead, words, we are increasingly seeing insurance and benefits; Kevin Turner and with war a reality, we see many that Customers who shop with us (former CIO) as president and chief of the same challenges we faced in for food and basic household supplies executive officer of SAM’S CLUB the previous year. However, just as are adding apparel and electronics to Division; and Doug McMillon as in 2002, this is no excuse for poor their shopping baskets. executive vice president and chief performance. In good times and bad, merchant at SAM’S CLUB. Customers will shop at Wal-Mart. We Last year we assumed responsibility of are well-positioned in the marketplace global procurement from a third party. Speaking of SAM’S CLUB, it is as the price and value leader. We are This allowed us to better coordinate important for you to know that well-positioned for continued success. the entire global we were not supply chain “…thanks to our Associates, pleased with its Of course, I cannot end this letter from product performance in without expressing once again my Wal-Mart was able to report development 2002. Today, appreciation to our Associates around record sales and record to delivery. we have a new the world for their hard work, to our In addition, earnings in one of the management team Customers for their loyalty, to our our global in place that is suppliers for their support and service, most difficult business procurement energized and and to the Wal-Mart Shareholders program allows environments in recent years.” refocused on the who invest in our Company. us to share our basics of the Club buying power and merchandise business. Satisfying the needs of the My best wishes to all of you in the network with all our operations business member is a renewed priority coming year. throughout the world. This helps fulfill for SAM’S CLUB. the promise of Sam Walton to deliver quality and value not only to U.S. We should also recognize the value consumers, but also to consumers that our support groups bring to around the world. the business. For example, the core Lee Scott competencies we have developed in Sam Walton also worked to logistics, information systems and continuously develop the next real estate represent an essential generation of Wal-Mart leaders. part of our “every day low cost” He knew that to be successful, all commitment, which makes “Every Wal-Mart leaders must understand Day Low Prices” possible. our culture and our commitment to integrity. That’s why we’ve developed Another highlight to the year was a number of leadership initiatives, when our company was honored by including the Business Leadership FORTUNEmagazine as the “Most Series, People Asset Reviews and Admired Company” in America. accelerated programs for high- Generally, we are not fans of lists and potential international managers. awards, but this one is meaningful 3 A Letter Fellow Shareholders and Associates, responsibilities seriously, and are diligent in carrying out their duties. from the I feel that it is important to communicate directly with you in Many commentators on corporate Chairman this time of increased scrutiny of governance advocate separating the roles of the Board corporate governance practices, and to of Chairman of the Board and Chief share with you my perspective on the Executive Officer. At Wal-Mart, these governance of your Wal-Mart. positions have been separate for 15 years. This may not be right for every I became chairman of the board in company, but it works well for your 1992, upon the death of my father, Company. In addition to my duties as Sam Walton. It is a responsibility I Chairman, I advise and support Lee and take seriously. The long-term success of our entire management team on Wal-Mart and of our Associates is a strategic issues, expansion and matter of personal and family pride, and acquisition opportunities, corporate an important part of this success is good policies and governance issues, and – governance practices. most important to me – the identification, development, education First and foremost, a culture of ethical and retention of a strong and deep Rob Walton behavior underlies all that we do at pool of talent to manage Wal-Mart in Wal-Mart. All of us who worked the future. with my father remember the many talks he gave stressing the Wal-Mart’s directors are elected importance of honesty, integrity annually, and the Company has been and fairness in our dealings with committed for years to having a our Customers, suppliers, majority of independent outside Associates and the communities directors. However, our board also in which we operate. David includes directors who have Glass, your former chief comprehensive, hands-on knowledge executive officer, and Lee Scott, about the Company’s operations; your current chief executive namely David Glass, Lee Scott and Tom officer, have continued that Coughlin. These “inside directors” commitment. Setting the right provide a perspective on the Company ethical tone at the top is the first that we believe is crucial to its step towards good corporate continued success. Overall, the strength governance at Wal-Mart. of your Company’s board comes from a mix of inside directors who have in- We are committed to maintaining a depth knowledge of the Company, and diverse and engaged board of outside directors who bring fresh directors to oversee your Company. viewpoints and unique perspectives to Our directors have varied and the issues facing the Company. distinguished backgrounds, a wealth of expertise, and broad experience in The Walton family is a large Shareholder many industries. Qualified directors of your Company, and the family’s alone, however, do not assure good interest in the long-term success of the corporate governance; directors also Company is aligned closely with the must act responsibly and ask tough interests of all Shareholders and questions of management. Procedures Associates. Like you, the family wants are no substitute for penetrating your Company to grow and prosper. The inquiry, open minds and open family’s commitment is reflected by my discussion. The board engages in, and is service as chairman, and by that of my committed to, vigorous and open debate brother, John, as a director. The family and discussion on issues facing the believes that all Shareholders should Company. I am proud of the directors benefit from our active participation. who serve you. They, too, take their 4 The board of directors believes that take appropriate follow-up actions and necessary. Our committee chairs take equity-based compensation is an report back to the full board. their responsibilities seriously and are important piece of the overall diligent in their preparation for compensation of directors and senior A significant amount of the board’s committee meetings. We believe that management. The ownership of business is first reviewed in detail by one the quality of the work done at the Wal-Mart stock and options by directors of the board’s three standing committee level contributes significantly and senior management is important committees. For example, the audit to the quality of our board meetings. because these individuals represent the committee meets each quarter with Shareholders and should act in a Company management, including Lee The board and I welcome your manner consistent with the long-term Scott and Tom Schoewe, chief financial comments, suggestions or concerns. interests of Shareholders. Making equity officer, and Ernst & Young, our outside You may contact us by e-mail using part of their auditors, to review the full name of the director as listed compensation helps and approve the on the inside of the front cover of this “Our family is proud of the achieve this financial reports for Annual Report without punctuation. objective. The board accomplishments of our the Company and For example, mine would be also emphasizes the CEO and CFO [email protected]. Wal-Mart Associates around compensation certifications that If you want to send a message to policies that place the world. Without their now accompany the full board, address it to the cash bonuses of these reports. [email protected]. If you senior management dedication and commitment, Members of the want to reach just the independent at risk. The audit committee are directors, address the message to there would be no Wal-Mart.” performance targets free to question any [email protected]. management must financial or reach to receive this compensation operational practice in the Company, Although Wal-Mart has grown large, further align their interests with the and the committee has the authority to we still focus daily on the culture and long-term success of the Company. hire independent outside advisors when values established by my father, Sam it believes it is appropriate to do so. Walton. Our family is proud of the The Wal-Mart board meets in person Another example would be the strategic accomplishments of our Wal-Mart four times annually at our regularly planning and finance committee’s Associates around the world. Without scheduled meetings. The board also has review of the Company’s derivatives their dedication and commitment, there one regularly scheduled telephonic portfolio, and its broad mandate to would be no Wal-Mart. The Company meeting after the important Christmas monitor compliance with our guidelines has many opportunities ahead of it, and selling season. In addition, we have on other financing matters. In addition I am proud to serve our Associates and frequent telephone meetings to approve to its traditional role of reviewing our Shareholders as we look towards acquisitions, report on developments executive compensation programs and the future. between regular board meetings, or to management succession plans, the address other issues. Board members compensation, nominating and also communicate on a regular basis governance committee oversees the directly with members of management board’s nominating and governance on issues of importance. functions, the board’s annual self- evaluation process, and recently Sincerely, The board actively participates in presented a revised Corporate Rob Walton succession planning, and the seamless Governance Policy and revised transition from David Glass to Lee Scott committee charters (which you can view is attributable in part to the board’s at www.walmartstores.com) to the full stewardship of this important process. board for approval. A best practice that Wal-Mart implemented last summer is the The three board committees discussed meeting of independent directors. The above consist of outside, non-employee independent directors meet separately at directors. As there is no overlap in each of our four regularly scheduled committee memberships, the board meetings each year. Director committees meet for an extended period Stanley Gault presides over these of time in connection with every meetings, and communicates any issues regularly scheduled board meeting, and raised to Lee Scott and me. We then at other times throughout the year as 5 Showing the Value At Wal-Mart, everything we do is the lowest price available for an item about value: finding it, making it and of its kind. Here, you’ll find 88-cent sharing it with our Customers. Our toothpaste, $10 cookware sets, a gas Why Less Is More job is to see how little we can charge grill for less than $100, DVD players at Wal-Mart for a product, not how much – how for under $50 and microwave ovens easy we can make it to shop with us, for less than $35. And right down not how difficult. the aisle, you’ll find merchandise that’s one step up in quality for just One of our favorite ways to introduce a little more. value is the Rollback program, which began in 1992 as a way of reminding Wal-Mart is the home of respected Customers that we’re not resting on national brands, but when the our Every Day Low Prices. Customers company sees an opportunity to quickly learned that Rollbacks aren’t create a a gimmick or a “sale.” Once we roll better back the price of an item, it tends to value we’ll stay that way for quite awhile, and add a private- this tends to make people smile. So label product to for many years, Rollbacks have had a the mix, providing cheerful mascot: a sunny-yellow smiley brand quality at a lower price. That’s face known simply as “Smiley.” how Ol’ Roy®became the best-selling brand of dog food in the U.S. Wal-Mart’s value also comes from staying true to its foundation of Wal-Mart never compromises on offering “opening price points” – quality to sell for less. Consumer-testing 6 Fiscal 2003 End-of-Year Store Count State Discount StoresSupercentersSAM’S CLUBSNMeairgkhebtosrhood State Discount StoresSupercentersSAM’S CLUBSNMeairgkhebtosrhood Alabama 34 49 9 2 Nebraska 10 11 3 0 Alaska 6 0 3 0 Nevada 11 7 5 0 Arizona 24 17 10 0 New Hampshire 19 6 4 0 Arkansas 35 43 4 6 New Jersey 30 0 8 0 California 133 0 30 0 New Mexico 6 18 5 0 Colorado 17 29 14 0 New York 52 22 18 0 Connecticut 27 2 3 0 North Carolina 47 52 17 0 laboratories ensure our products meet Delaware 3 3 1 0 North Dakota 8 0 2 0 recognized industry standards or Florida 66 87 37 1 Ohio 70 28 26 0 goverment regulations, regardless Georgia 42 61 20 0 Oklahoma 41 40 7 12 of the price. But if, despite our Hawaii 6 0 1 0 Oregon 24 3 0 0 efforts, a Customer has a problem Idaho 5 11 1 0 Pennsylvania 50 43 20 0 with a product, there is no greater Illinois 81 33 27 0 Rhode Island 8 0 1 0 value at Wal-Mart than our return- Indiana 42 42 14 0 South Carolina 22 37 9 0 and-exchange policy, one of the Iowa 27 24 7 0 South Dakota 6 4 2 0 most liberal satisfaction guarantees Kansas 29 23 6 0 Tennessee 33 57 15 2 in the business. If you have a problem Kentucky 34 41 5 0 Texas 117 155 68 24 with a purchase, Wal-Mart will treat Louisiana 35 47 12 0 Utah 6 15 7 1 you fairly. Maine 12 9 3 0 Vermont 4 0 0 0 The incredible assortment at Maryland 32 5 13 0 Virginia 21 52 13 0 Wal-Mart – featuring up to 150,000 Massachusetts 41 1 3 0 Washington 29 6 2 0 different items in our biggest Michigan 48 14 22 0 West Virginia 8 20 3 0 Supercenters – is a colossal value Minnesota 34 9 12 0 Wisconsin 49 20 11 0 in and of itself, helping Customers Mississippi 21 41 5 1 Wyoming 2 7 2 0 get everything they need in one Missouri 56 58 14 0 U.S. Totals: 1,568 1,258 525 49 place. And with our seasonal items, Montana 5 6 1 0 Wal-Mart stores actually International/Worldwide create an ever- changing Argentina 0 11 0 0 Mexico 472† 75 50 0 shopping list Brazil 0 12 8 2* Puerto Rico 9 1 9 33** for the Canada 213 0 0 0 United Kingdom 248‡ 10 0 0 Customer. China 0 20 4 2 International With today’s Totals: 942 238 71 37 Germany 0 94 0 0 busy lifestyles, Grand Totals: 2,510 1,496 596 86 Korea 0 15 0 0 that’s a value worth * Brazil includes Todo Dias smiling †Mexico includes118 Bodegas, 50 Suburbias, 44 Superamas, 260 Vips about. ** Puerto Rico includes 33 Amigos ‡United Kingdom includes 248 ASDA Stores 7 Can Wal-Mart maintain double-digit a great example. From ASDA, Thinking Small growth when we’ve already reached Wal-Mart’s operation in the U.K., nearly $245 billion in sales? If we we’ve extended the George™ brand of focus on one store at a time, it’s clothing into the U.S. market. Levi’s® That’s How a Successful possible to achieve this goal. apparel also will be sold at Wal-Mart Retailer Can Continue this year, but that doesn’t mean to Grow “Our growth comes from thinking like Wal-Mart is abandoning its opening a small company, not like a large one,” price points or its core Customers. says Tom Coughlin, president and chief executive officer of Wal-Mart Wal-Mart’s product-development Stores Division and SAM’S CLUB USA. experts are designing fresh colors for “We will take care of the little things housewares and domestics that will for our Customers, the way a small match up with the colors in the company would.” paint department. Customers will also see Egyptian-cotton towels and The groundwork for this philosophy bedding at the same prices we had has already been last year for our laid in successful regular towels programs like and bedding. “Store of the Community,” “Our food which tailors program is the retail better-focused assortment, now and merchandising continues and to be driven philanthropic by national efforts of each brands,” says store to the Coughlin. “One needs of the community. The “spirit area that is especially ripe for new of small” is also alive in Sam Walton’s sales opportunities is heat-and-serve “Store Within a Store” program, which meals, where we’ve already made encourages each department manager great strides.” to act like an independent merchant. Keeping Pace with Technology “We can’t cookie-cutter prototype “We will also continue to feature merchandise programs into all new technology in our electronics the stores,” says Coughlin. “It just department,” Coughlin says. “With doesn’t work. Even two stores within DVD players, we entered the market the same community can have very at an early point and did very well. different needs.” Now we’re doing the same with flat- screen TVs and new advances in Better Merchandise, New Products wireless technology.” “This represents Another way Wal-Mart can grow is by a change,” says Don Harris, executive improving merchandise and adding vice president of general merchandise. new product lines. Apparel provides “We once thought we wouldn’t sell 8